Like Luka mentioned, there's now way fan games are going to compete with the official games graphics-wise. I still think we've reached a point in fan gamed development where we only have two options: grow stale and stick to what he had before, or be innovative in ways different from Nintendo's. I seriously doubt anyone is willing to build an entire 3D engine that will probably not even come close to the official quality.

There are already countless 3ds engines out there. What truly makes it difficult to replicate is coding all the systems (assuming that someone rips all the models from the rom when released). The jump between 2d and 3d is huge, and changes the coding drastically.